contract law essay

Advertisements constitute an invitation to treat

In no more than 1250 words advise Tony and Curtis as to the application of that law in response to the company’s claims.

The general prima facie rule as articulated in Partridge v Crittenden [1] is that advertisements constitute an invitation to treat rather than an offer. The result of this on the facts was that the defendant could not be prosecuted under the Protection of Birds Act 1985 for advertising wild birds for sale because he did not ‘offer’ them for sale, but rather made an invitation to treat, an offer to receive offers. The upshot of this is the protection of vendors insofar as they cannot be compelled to sell goods at the advertised price and are saved from potential multiple liabilities. However, as Professor Treitel [2] states, these rules may be displaced by evidence of contrary intention. A case in point where this displacement occurred was Carlill v Carbolic Smoke Ball Co. [3] in which an advertisement was held to constitute an offer rather than an invitation to treat. A key factor in this decision was that the advertisement was held not to be a ‘mere puff’ but was ‘intended to be understood by the public as an offer which was to be acted upon’. Evidence of this on the facts was that the defendants put money aside in a bank account to make such payments. However, one might distinguish Carlill as it concerned a unilateral contract. The problem under discussion could be bilateral given the claimants received the TV in exchange for monies paid. It may however be possible to construe the advertisement as a unilateral contract, the condition of which is purchasing the TV. A deadline was set, May 20, which the claimants met, along with a specific cash back offer of £500 for purchases before this deadline. This could be used as evidence that the defendant intended to be bound if the claimant met that deadline. In support of this the claimants could argue Bowerman v Association of British Travel Agents Ltd. [th] , which involved a contract in which Carlill was applied by the Court of Appeal, in respect of a notice in a travel agents stipulating that monies paid would be reimbursed in case of insolvency. Waite LJ, applying Carlill, stated ‘the central issue... is whether an ordinary member of the public, reading the notice as a whole, would read it as intended to create legal relations’. It is suggested that given the presence of the deadline, the defendants had an intention to be bound, and the advertisement should be held to fall within the Carlill exception.

Even if the Carlill exception is found not to apply, it is submitted that the advertisement should be held to be a collateral contract to the contract of sale of the TV. In Evans & Sons Ltd v Andrea Merzario Ltd, Lord Denning defined a collateral contract as arising where, ‘When a person gives a promise, or an assurance to another, intending that he should act on it by entering into a contract, we hold that it is binding’. This holds true, even as here, the contract of sale made no reference to the advertisement. Here the claimants were induced into entering into the contract of sale by the deals contained in the advertisement. The doctrine of collateral contracts has enabled the courts to allow pre-contractual statements to be relied upon. A pertinent example to the problem under discussion is Barry v Davies (Trading as Heathcote Ball & Co) [4] , in which the Court of Appeal founder there to be a collateral contract between the auctioneer and the highest bidder: in a ‘no reserve’ sale, the auctioneer made an offer in a collateral contract would sell to the highest bidder, and this was accepted when the bid was made. The court refused to allow the defendants to escape from a bad bargain, so Sonny would not be able to object that the full £2500 was reclaimed. Applying this to the facts under discussion, similarly a contract of sale, the cash back offers in the advertisement may be found to constitute a collateral contract and thus bind Sonny.

A further issue Tony and Curtis would have to address is that of certainty of terms. Whilst the initial £500 cash back offer is unequivocal, it might be argued that the goal-dependent cash back offer is insufficiently clear to form the basis of a contractual obligation. Section 8(1) of the Sale of Goods Act 1979 states that ‘The price in a contract of sale may be fixed by the contract, or may be left to be fixed in a manner agreed by the contract’. It might be argued that the contract fails for want of certainty of terms on the basis of May & Butcher Ltd v R [5] , in which it was held that price is essential to a contract of sale, and until it is settled there is no contract. Even in line with the restrictive view taken in this case, so long as the determination does not depend on the agreement of the parties, such as the goal-based determination in this case, a valid contract is concluded. In Hillas v Arcos [6] the approach was to look to the intentions of the parties to see whether an agreement omitting essential terms is enforceable. It is likely that the court would give effect to the term, especially since the price of the TV is clear and it is the issue of cash back that is open to question.

The second issue regards the contended provisos to the offer, namely that own goals and penalties are not relevant and a maximum of 10 goals are to be taken into account. This is first and foremost a question of interpretation [7] of the express terms of the contract, with the approach laid down in Investors Compensation Scheme Ltd v West Bromwich Building Society [8] . The words used by the parties to be are to be given their ordinary meaning, but in accordance with a purposive approach based on the “background", in line with the intention of the parties. The contract specifies ‘For every goal England score we will give you a further £50 back’, and the mention of 10 goals if given as an example of this in operation, as opposed to stating a maximum limit. Taking a literal approach to the contract would mean that own goals were not technically scored by England but the opposing side, and so would not count. Sonny might argue that in stating ‘you could end up paying £1500 for a £2500 TV’ they were exemplifying the best result their customers could hope to attain, and that it would not be a ‘commercially sensible’ construction, in accordance with Lord Steyn in Lord Napier and Ettick v Kershaw [9] . However, here there is an inequality of bargaining power and not two commercial parties, and it is clear from the cases pertaining to implied terms that the courts are unlikely to favour a construction that benefits the stronger party to a contract and disadvantages the weaker consumer merely because the former got a bad bargain [10] , as evidenced in the contra proferentum rule. The House of Lords in Liverpool CC v Irwin made clear that for a term to be implied it must be ‘necessary’ to make the contract effective as opposed to merely reasonable. On this basis, it is unlikely that the court would read in a ‘maximum’ number of goals that was not clearly specified but, and certainly would not consider penalties irrelevant. It is submitted, therefore, that a literal approach would be applied and own goals would not count, but terms benefitting the retailer in relation to penalties and a maximum number of goals would not be implied. Tony and Curtis would therefore be entitled to £690 cash back.

Biobliography

Ewan McKendrick, Contract Law (5 Edition)

G.H Treitel, The Law of Contract (11thth Edition)

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